[Cite as Siltstone Resources, L.L.C. v. Ohio Pub. Works Comm., 2019-Ohio-4916.]

IN THE COURT OF APPEALS OF OHIO

SEVENTH APPELLATE DISTRICT BELMONT COUNTY

SILTSTONE RESOURCES, LLC,

Plaintiff-Appellee,

v.

STATE OF OHIO PUBLIC WORKS COMMISSION, et al.,

Defendants-Appellants.

O P I N I O N AN D J U D G M E N T E N T R Y

Case No. 18 BE 0042

Civil Appeal from the

Court of Common Pleas of Belmont County, Ohio Case No. 17 CV 128

BEFORE:

Gene Donofrio, Cheryl L. Waite, Carol Ann Robb, Judges.

JUDGMENT: Reversed and Remanded.

Atty. Andrew P. Lycans, Critchfield, Critchfield, & Johnson, LTD., 225 North Market Street, P.O. Box 599, Wooster Ohio 44691 and Atty. Manmeet S. Walla, Siltstone Resources, LLC, 1801 Smith Street, Suite 2000, Houston Texas 77002 for Plaintiff-Appellee and

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Case No. 18 BE 0042

Atty. Michael DeWine, Ohio Attorney General, Atty. Jennifer Croskey, Atty. James Patterson, Atty. Rachel Huston, Atty. Christie Limbert, Atty. Leigh Bayer, Assistant Attorneys General, Executive Agencies Section, 30 East Broad Street, 26th Floor, Columbus, Ohio 43215 for Defendants-Appellants and Atty. William B. Benson, Atty. Maribeth Meluch, Isaac, Wiles Burkholder & Teetor, LLC, Two Miranova Place, Suite 700, Columbus, Ohio 43215 for Appellee-Defendant, The Guernsey County Community Development Corporation and Atty. Aaron M. Bruggeman, Atty. Christine Rideout Schirra, Atty. Daniel C. Gibson, Atty. Matthew W. Warnock , Atty. Kara Herrnstein, Bricker & Eckler LLP, 100 South Third Street, Columbus, Ohio 43215 and Atty. Zachary M. Simpson, Gulfport Energy Corporation, 14313 North May Avenue, Suite 100, Oklahoma City, Oklahoma 73134 for Cross-Claim Appellee-Defendant, Gulfport Energy Corporation and Atty .Richard V. Zurz, Jr. Slater & Zurz, LLP, One Cascade Plaza, Akron, Ohio 44308, for Cross-Claim Defendants-Appellees, Patriot Land Co. and James Coffelt and Atty. John Kevin West, Steptoe & Johnson PLLC, 41 South High Street, Suite 2200, Columbus, Ohio 43215 and Atty. Kara Herrnstein, Bricker & Eckler LLP, 100 South Third Street, Columbus, Ohio 43215 for Cross-Claim Defendant-Appellee, Windsor Ohio, LLC and Atty. David K. Schaffner, Schaffner Law Offices, Co., L.P.A, 132 Fair Avenue, N.W., New Philadelphia, Ohio 44663 and Atty. Kara Herrnstein, Bricker & Eckler LLP, 100 South Third Street, Columbus, Ohio 43215 for Cross-Claim Defendant-Appellee, Whispering Pines, LLC and Atty. Erik A. Schramm, Atty. Kyle W. Bickford, Hanlon, Estadt, McCormick & Schramm Co., LPA, and Atty. Kara Herrnstein, Bricker & Eckler LLP, 100 South Third Street, Columbus, Ohio 43215 for Cross-Claim Defendant-Appellee, Axebridge Energy, LLC and Atty. Scott M Zurakowski, Atty. William G. Williams, Atty. Matthew W. Onest, Krugliak, Wilkins, Griffiths & Dougherty Co., L.P.A., 4775 Munson Street N.W., P O Box 36963, Canton, Ohio 44735 and Atty. Kara Herrnstein, Bricker & Eckler LLP, 100 South Third Street, Columbus, Ohio 43215 for Cross-Claim Defendant-Appellee, Eagle Creek Farm Properties, Inc. and Atty. William J. Taylor, Atty. Scott D. Eickelberger, Atty. Ryan H. Linn, Atty. David J. Tarbert, Kinkaid, Taylor & Geyer, 50 North Fourth Street, P.O. Box 1030, Zanesville, Ohio 43702, Atty. Kara Herrnstein, Bricker & Eckler LLP, 100 South Third Street, Columbus, Ohio 43215 for Cross-Claim Defendant-Appellee, The Bank of Nova Scotia and

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Case No. 18 BE 0042

Atty. Kevin L. Colosimo, Atty. Christopher A. Rogers, Atty. Daniel P. Craig, Frost Brown Todd LLC, 501 Grant Street, Suite 800, Pittsburgh, Pennsylvania 15219 for Cross-Claim Defendant-Appellee, American Energy-Utica Minerals, LLC.

Dated:

November 25, 2019

DONOFRIO, J.

{¶1} Defendant-Appellant Ohio Public Works Commission (OPWC) appeals

from Belmont County Common Pleas Court judgments granting Plaintiff-Appellee’s

Siltstone Resources, LLC; Defendant-Appellee’s Guernsey County Community

Development Corporation; Cross-Claim Defendants-Appellees’ Gulfport Energy,

Corporation; Axebridge Energy, LLC; Eagle Creek Farm Properties, Inc.; Windsor Ohio,

LLC; The Bank of Nova Scotia; Whispering Pine, LLC; American Energy-Utica Minerals,

LLC; Patriot Land Company, LLC; and James Coffelt (collectively referred to as

Appellees) motions to dismiss, granting Appellees’ motions for partial summary judgment

and denying Appellant OPWC’s motion for partial summary judgment. The motions for

partial summary judgment concerned whether certain deed restrictions applied to the

subsurface of the property at issue. The trial court found the restrictions did not apply to

the subsurface.

{¶2} This case concerns the Clean Ohio Conservation Program and

approximately 228.45 acres of property in Belmont County, Ohio.

{¶3} In 2000, Ohio voters approved a constitutional amendment to create a tax-

exempt bond fund to be used for environmental conservation and revitalization purposes.

Ohio Constitution, Article VIII, Section 2o(A). The amendment permitted the General

Assembly to enact laws in accordance with the amendment. Ohio Constitution, Article

VIII, Section 2o(B). As a result of the amendment, the Clean Ohio Fund Green Space

Conservation Program was created and Appellant OPWC was tasked with administering

the program.

{¶4} In 2005, Defendant-Appellee Guernsey County Community Development

Corporation (Guernsey) applied for a $430,200 grant from the Clean Ohio Conservation

Fund for the Leatherwood Creek Riparian Project. The money was to be used to

purchase the 228.45 acre tract of land in Belmont County that parallels Leatherwood

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Case No. 18 BE 0042

Creek. Appellee Guernsey was going to restore the area to its natural state. It appears

this 228.45 acre tract abuts land in Guernsey County paralleling the Leatherwood Creek.

The abutting tract appears to be owned by Appellee Guernsey and is part of the

Leatherwood Creek Riparian Project. The 228.45 acres includes a railway bed to be

turned into a hike and bike trail.

{¶5} The 228.45 tract of land was previously strip mined and was being

reclaimed by Capstone Holding Company.

{¶6} Appellant OPWC approved the grant and a project agreement was entered

into between Appellant OPWC and Appellee Guernsey in 2006. As part of the agreement,

deed restrictions were required to be recorded with the deed.

{¶7} In 2007, Appellee Guernsey purchased the 228.45 acres from Capstone.

The deed contained the following restrictions:

1. Use and Development Restrictions. Declarant hereby agrees, for itself

and its successors and assigns as owners of the Property, which Property

shall be subject to the following: This property will not be developed in any

manner that conflicts with the use of the Premises as a green space park

area that protects the historical significance of this particular parcel. Only

current structures will be maintained and no new structures will be built on

the premises.

2. Perpetual Restrictions. The restrictions set forth in this deed shall be

perpetual and shall run with the land for the benefit of, and shall be

enforceable by, Ohio Public Works Commission (OPWC). This deed and

the covenants and restrictions set forth herein shall not be amended,

released, extinguished or otherwise modified without the prior written

consent of OPWC, which consent may be withheld in its sole and absolute

discretion.

3. Enforcement. If Grantee, or its successors or assigns as owner of the

Property, should fail to observe the covenants and restrictions set forth

herein, the Grantee or it is successors or assigns, as the case may be, shall

pay to OPWC upon demand, as liquidated damages, an amount equal to

the rate of (a) two hundred percent (200%) of the amount of the Grant

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Case No. 18 BE 0042

received by Grantee, together with interest accruing at the rate of six

percent (6%) per annum from the date of Grantee’s receipt of the Grant, or

(b) two hundred percent (200%) of the fair market value of the Property as

of the date or demand by OPWC. Grantee acknowledges that such sum is

not intended as, and shall not be deemed, a penalty, but is intended to

compensate for damages suffered in the event a breach or violation of the

covenants and restrictions set forth herein, the determination of which is not

readily ascertainable.

OPWC shall have the right to enforce by any proceedings at law or in equity,

all restrictions, conditions, and covenants set forth herein. Failures by

OPWC to proceed with such enforcement shall in no event be deemed a

waiver of the right to enforce at a later date the original violation or

subsequent violation.

4. Restrictions on transfer of the Property. Grantee acknowledges that the

Grant is specific to Grantee and that OPWC’s approval of Grantee’s

application for the Grant was made in reliance on Grantee’s continued

ownership and control of the Property. Accordingly, Grantee shall not

voluntarily or involuntarily sell, assign, transfer, lease, exchange, convey or

otherwise encumber the Property without the prior written consent of

OPWC, which consent may be withheld in its sole and absolute discretion.

(2007 Deed from Capstone Holding Company to Appellee Guernsey).

{¶8} Although the deed does not contain any oil and gas mineral reservation

language, it is undisputed that about 10 acres of the land conveyed had a prior mineral

interest, known as the Devine reservation. The remainder of the minerals were conveyed

to Appellee Guernsey with the surface. Consequently, Appellee Guernsey owned the

mineral rights to approximately 218 acres.

{¶9} In 2011, without written permission from Appellant OPWC, Appellee

Guernsey entered into a lease with Appellee Patriot Energy for all the oil and gas

underlying the property. This lease contains language prohibiting storage and disposal.

But it does permit the drilling of one water well with lessor’s consent and removal of timber

after appraisal. Also, the language of the lease does not appear to prohibit disturbing the

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Case No. 18 BE 0042

surface. The lease specifically states the construction or installation of access road and

pipeline rights of way would be done in a way to minimize any related soil erosion, but

does not require Appellee Guernsey’s permission prior to surface disturbing activity. (¶17

Patriot Lease). As part of the lease, Appellee Guernsey acquired a 14% royalty interest

on any oil and gas extracted from the Property.

{¶10} In 2012, Appellee Patriot assigned the lease to Appellee Gulfport.

{¶11} In 2013, without written permission from Appellant OPWC, Appellee

Guernsey sold 6/7 of its mineral interest to Appellee Siltstone Resources, Inc., which

amounted to 186.9189 mineral acres. (12/17/13 Purchase Agreement).

{¶12} In 2014, Appellee Guernsey, without written permission from Appellant

OPWC, sold 29.595 mineral acres to Triple Crown Energy LLC and that interest was

eventually assigned to Appellee American Energy-Utica Minerals, LLC.

{¶13} The parties agree that various interests in the lease and mineral estate were

transferred between and among various Appellees.

{¶14} It is undisputed that to date the surface of the property has not been

disturbed. No wells have been drilled on the surface, no access roads have been built

on the surface, and no removal of trees has occurred. The land is potentially being drilled

through use of lateral wells or preparation for drilling has begun.

{¶15} In 2017, Appellee Siltstone filed suit against Appellant OPWC, Appellee

Guernsey, and Appellee Gulfport. The complaint was amended twice. The remaining

Appellees were eventually added as necessary parties and OPWC filed a counterclaim

against Appellee Siltstone and cross-claims against the other appellees. This included

Appellee Gulfport, Appellee Guernsey, and Appellant OPWC filing cross-claims against

each other.

{¶16} Appellee Siltstone sought a declaration that Appellee Guernsey did not

violate the deed restrictions when it signed the oil and gas lease. Appellee Siltstone also

sought to quiet title to the minerals it had purchased from Appellee Guernsey. Appellee

Siltstone additionally argued Appellant OPWC could only recover monetary damages if it

was determined any Appellee was liable.

{¶17} OPWC’s counterclaim and cross-claims sought declaratory and injunctive

relief. It asked for an injunction restraining all parties from violating the deed restrictions

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and asked that the interest be assigned back to Appellee Guernsey. Appellant OPWC

also asked for liquidated damages as set forth in the deed.

{¶18} Appellees filed motions to dismiss asserting Appellant OPWC could not

pursue nonmonetary relief to enforce the deed restrictions. The trial court granted

Appellees’ motions to dismiss in part. (10/13/17 J.E.; 12/18/17 J.E.). It indicated it would

not make a ruling on whether or not the restrictive covenants were void ab initio.

(10/13/17 J.E.; 12/18/17 J.E.). Instead, the trial court determined injunctive relief was not

available to Appellant OPWC. It determined there was no language in the statute, R.C.

164.26(A), entitling Appellant OPWC to obtain equitable relief. The only relief set forth in

that statute was grant repayment and liquidated damages, i.e., monetary relief. (10/13/17

J.E.; 12/18/17 J.E.).

{¶19} Following that ruling, all parties filed motions for partial summary judgment

regarding whether the Use and Development Restriction and the Restrictions on transfer

of the Property applied to the subsurface. On July 20, 2018, following a hearing, the trial

court granted Appellees’ motions for partial summary judgment. The court determined

the Use and Development Restriction was unambiguous and did not apply to the

subsurface because green space is not underground. (7/20/18 J.E.). The court further

determined that the Restrictions on transfer of the Property constituted an illegal,

unreasonable restraint on alienability. (7/20/18 J.E.).

{¶20} Appellant OPWC timely appealed the trial court’s October/December 2017

dismissal order indicating it could not pursue equitable relief and the trial court’s July 2018

order granting partial summary judgment to Appellees holding there was no violation of

the deed restrictions and denying Appellant OPWC’s motion for partial summary

judgment. It now raises two assignments of error.

{¶21} Appellant OPWC’s first assignment of error states:

THE TRIAL COURT ERRED IN DENYING THE COMMISSION’S

MOTION FOR PARTIAL SUMMARY JUDGMENT AND IN GRANTING

APPELLEES’ VARIOUS MOTIONS FOR PARTIAL SUMMARY

JUDGMENT BECAUSE THE DEED RESTRICTIONS ARE

ENFORCEABLE AND SHOULD HAVE BEEN ENFORCED AGAINST THE

APPELLEES.

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Case No. 18 BE 0042

{¶22} Appellant OPWC raises two issues in this assignment of error. First, it

argues the trial court erred in granting summary judgment to Appellees on the basis that

the Use and Development Restriction did not apply to the subsurface since green space

cannot be underground. Second, it argues the trial court erred in holding that the

Alienation Restriction had no impact on the green space of the property.

{¶23} An appellate court reviews a summary judgment ruling de novo. Comer v.

Risko, 106 Ohio St.3d 185, 2005-Ohio-4559, 833 N.E.2d 712, ¶ 8. Thus, we shall apply

the same test as the trial court in determining whether its judgment granting Appellees’

motions for partial summary judgment and denying Appellant OPWC’s motion for partial

summary judgment was proper.

{¶24} A court may grant summary judgment only when (1) no genuine issue of

material fact exists; (2) the moving party is entitled to judgment as a matter of law; and

(3) the evidence can only produce a finding that is contrary to the non-moving party.

Mercer v. Halmbacher, 9th Dist. Summit No. 27799, 2015-Ohio-4167, ¶ 8; Civ.R. 56(C).

“Trial courts should award summary judgment with caution, being careful to resolve

doubts and construe evidence in favor of the nonmoving party.” Welco Industries, Inc. v.

Applied Cos., 67 Ohio St.3d 344, 346, 617 N.E.2d 1129 (1993).

{¶25} As stated above, the trial court determined the Use and Development

Restriction only applied to the surface “because green space is not underground.”

(7/20/18 J.E.). It also stated “the subsurface (whether by lease, deed, mortgage, or

otherwise) has no impact on the green space on the Premises.” (7/20/18 J.E.).

Therefore, the court concluded the “Alienation Restriction is an illegal unreasonable

restraint on alienability as it has been attempted to be utilized in this case to apply to the

subsurface estate.” (7/20/18 J.E.).

{¶26} Appellant OPWC argues that decision is incorrect. It contends the language

of the restriction is clear and unambiguous; the deed restrictions apply to subsurface and

surface. It asserts the Ohio Constitution and R.C. 164.26 grant it the authority to establish

policies to ensure the grant recipients maintain long term ownership and control of the

property purchased with Clean Ohio funds. It argues environmental conservation is not

limited to the surface of the land; it includes the protection of above ground and below

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Case No. 18 BE 0042

ground water. Alternatively, it argues even if green space only included the surface, the

surface is still affected by subsurface mining, and the leasing and selling of the minerals.

{¶27} Although there are many Appellees and many Appellee briefs filed, the

arguments asserted by the individual Appellees are very similar. They assert the Use

and Development Restriction only restricts three uses. First, it restricts any new structures

being built on the premises. Second, it restricts use that will impact the historical

significance of the premises. Third, it restricts use of the property that conflicts with the

premises being used as a green space park area. They contend it is undisputed that

there have been no new structures built on the property and there is no evidence of

“historical significance” of the property. They argue the only issue is whether subsurface

lateral mining thousands of feet below the surface conflicts with the premises being used

as a green space park area. They contend it does not; a green space park occurs on the

surface, not the subsurface. Thus, according to Appellees the deed restriction is clear

and unambiguous; it applies only to the surface and the lease/sale of the subsurface has

not affected the surface in any manner. They assert the use of the word “on” when

referencing new structures means the restriction only applies to the surface. They argue

if the restriction was intended to restrict the subsurface that language would have been

included in the restriction. Appellees contend we cannot look to R.C. 164.22 and the Ohio

Constitution to determine what the deed restrictions were intended to restrict.

{¶28} Alternatively, Appellees also argue that if the deed restriction is ambiguous

it should be interpreted against the party seeking to enforce the restriction and against

the alienation of the property. Appellees contend the deed defines “Premises” based

upon the legal description. However, it does not define “Property.” Thus, since the word

“Property” as used in the restriction can be defined in multiple ways, the deed restriction

must be interpreted in the least restrictive manner. Appellees also assert if the Use and

Development Restriction is interpreted to apply to the subsurface, then it is an unlawful

restraint on alienation.

{¶29} “A ‘restrictive covenant’ is a ‘private agreement, [usually] in a deed or lease,

that restricts the use or occupancy of real property, [especially] by specifying lot sizes,

building lines, architectural styles, and the uses to which the property may be put’.”

Canton v. State, 95 Ohio St.3d 149, 2002-Ohio-2005, 766 N.E.2d 963, ¶ 28 (2002), citing

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Black's Law Dictionary 371 (7th Ed.Rev.1999). Contract construction rules apply to the

interpretation of the deed restrictions. In the case of contracts, deeds, or other written

instruments, the construction of the writing is a matter of law, which is reviewed de novo.

Long Beach Assn., Inc. v. Jones, 82 Ohio St.3d 574, 576, 697 N.E.2d 208 (1998). Under

a de novo review, an appellate court may interpret the language of the contract

substituting its interpretation for that of the trial court. Witte v. Protek Ltd., 5th Dist. Stark

No. 2009CA00230, 2010-Ohio-1193, ¶ 6, citing Children's Medical Center v. Ward, 87

Ohio App.3d 504, 622 N.E.2d 692 (2d Dist.1993).

{¶30} Written instruments “are to be interpreted so as to carry out the intent of the

parties, as that intent is evidenced by the contractual language.” Skivolocki v. East Ohio

Gas Co., 38 Ohio St.2d 244, 313 N.E.2d 374 (1974), paragraph one of the syllabus.

“When construing a deed, a court must examine the language contained within the deed,

the question being not what the parties meant to say, but the meaning of what they did

say, as courts cannot put words into an instrument which the parties themselves failed to

do.” Johnson v. Consol. Coal Co., 7th Dist. Belmont No. 13 BE 3, 2015-Ohio-2246, ¶ 15

quoting, McCoy v. AFTI Properties, Inc., 10th Dist. Franklin No. 07AP-713, 2008-Ohio-

2304, ¶ 8. If the terms of the written instrument are clear and unambiguous, courts must

give the words their plain and ordinary meaning and may not create a new contract by

finding the parties intended something not set out in the contract. Alexander v. Buckeye

Pipe Line, 53 Ohio St.2d 241, 246, 374 N.E.2d 146 (1978).

{¶31} But when the plain language of a written instrument is ambiguous, then a

court can look to parol evidence to resolve the ambiguity and ascertain the parties' intent.

Illinois Controls, Inc. v. Langham, 70 Ohio St.3d 512, 521, 639 N.E.2d 771 (1994); City of

Steubenville v. Jefferson Cty., 7th Dist. Jefferson No. 07JE51, 2008-Ohio-5053, ¶ 22.

Terms in a contract are ambiguous if their meanings cannot be determined from reading

the entire contract, or if they are reasonably susceptible to multiple interpretations. First

Natl. Bank of Pennsylvania v. Nader, 2017-Ohio-1482, 89 N.E.3d 274, ¶ 25 (9th Dist.).

{¶32} With that standard in mind, we examine the language used in the Use and

Development Restriction:

1. Use and Development Restrictions. Declarant hereby agrees, for

itself and its successors and assigns as owners of the Property, which

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Case No. 18 BE 0042

Property shall be subject to the following: This property will not be

developed in any manner that conflicts with the use of the Premises as a

green space park area that protects the historical significance of this

particular parcel. Only current structures will be maintained and no new

structures will be built on the premises.

(2007 Deed from Capstone Holding Company to Appellee Guernsey).

{¶33} It is undisputed that no new structures have been built on the premises.

Also, no one has suggested this property has historical significance. The issue here is

whether the lateral mining is a development of the “property” in a “manner that conflicts

with the use of the premises as a green space park area.” Specifically, does the

statement, “This property will not be developed in any manner that conflicts with the use

of the Premises as a green space park area” prevent lateral mining?

{¶34} The deed defines the word “Premises.” The definition is the legal

description (metes and bounds) of the land sold. The deed does not indicate the oil and

gas rights were severed from the surface. Therefore, the word “premises” includes

everything that was conveyed, including mineral rights.

{¶35} The deed defines the word “Premises” on the first page of the deed as

Exhibit A, which is a legal description of the property conveyed. The deed uses the word

“premises” to describe what was conveyed. For instance, the first sentence states, “for

valuable consideration received grants with limited warranty covenant to The Guernsey

County Community Development Corporation * * * the following described premises.”

The limited warranty paragraph begins by stating, “Under and Subject to any and all

exceptions, reservations, restrictions, easements, rights of way, highways, estates,

covenants and conditions apparent on the premises or shown by instruments of record *

* *.” It then states, “By accepting this deed Grantee also acknowledge that it has

inspected the premises and is acquired the same as a result of such inspections in its

present condition and circumstance.”

{¶36} It is not until the restrictions that the use of the word “property” is used in

the deed. The deed does not define “property.”

{¶37} The use of the words “premises” and “property” in the context they are used

in this deed does not indicate that the words have two separate meanings. They are

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referring to all the rights conveyed by deed subject to the Use and Development

Restrictions that place restrictions on surface use only. When the words “property” and

“premises” are used in conjunction with “green space park area” they can only apply to

the surface.

{¶38} We agree with the trial court that “green space” is not underground, rather

it is surface. “Green space park area” is not defined in the deed. Likewise, it is also not

defined in the statutes enacted as part of the Ohio Clean Conservation Fund.

{¶39} R.C. 164.22 titled the “Natural Resources Assistance Councils; Power and

Duties” provides for the natural resource assistance council to review grants for projects

that propose the acquisition of land and easements in parks, forests, wetlands, natural

areas for the protection of endangered plant or animal population, other natural areas,

and connecting corridors for natural areas. R.C. 164.22(A). Projects proposed pursuant

to division (A) must emphasize:

(4) The preservation of existing high quality wetlands or other scarce

natural resources within the geographical jurisdiction of the council;

(5) The enhancement of educational opportunities and provision of

physical links to schools and after-school centers;

(6) The preservation or restoration of water quality, natural stream

channels, functioning floodplains, wetlands, streamside forests, and other

natural features that contribute to the quality of life in this state and to the

state's natural heritage. Projects shall not include hydromodification

projects such as dams, dredging, sedimentation, and bank clearing and

shall not accelerate untreated water runoff or encourage invasive nonnative

species.

R.C.164.22(A)(4)-(6).

{¶40} The natural resource council also reviews grants for projects that propose

to:

(B) Protect and enhance riparian corridors or watersheds, including

the protection and enhancement of streams, rivers, lakes, and other waters

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Case No. 18 BE 0042

of the state. Such projects may include, without limitation, the reforestation

of land or the planting of vegetation for filtration purposes; the fee simple

acquisition of lands for the purpose of providing access to riparian corridors

or watersheds or for other purposes necessary for the protection and

enhancement of riparian corridors or watersheds; and the acquisition of

easements for the purpose of protecting and enhancing riparian corridors

or watersheds. Projects proposed pursuant to division (B) of this section

shall emphasize the following:

(1) The increase of habitat protection;

(2) Inclusion as part of a stream corridor-wide or watershed-wide

plan;

(3) The provision of multiple recreational, economic, and aesthetic

preservation benefits;

(4) The preservation or restoration of floodplain and streamside

forest functions;

(5) The preservation of headwater streams;

(6) The restoration and preservation of aquatic biological

communities.

Projects shall not initiate or perpetuate hydromodification projects

such as dams, ditch development, or channelization.

R.C.164.22(B).

{¶41} These statutes refer to surface areas. Therefore, they support our

conclusion that “green space park area” is a reference to the surface.

{¶42} Since there is no statutory or deed definition for “green space park area,”

rules of construction indicate we use the common definition. A park is an area of land set

aside for public use. https://www.thefreedictionary.com/park. Green space is “a natural

area in or around a development, intended to provide buffer, noise control, recreational

use, and/or wildlife refuge, all in order to enhance the quality of life in and around the

development.” https://financial-dictionary.thefreedictionary.com/ green+space. Green

space is often intentionally provided in the urban setting; it is nature space in the city.

However, green space may occur in the rural setting also. Commonly, in the rural settings

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it is preserving areas of nature from development or reclaiming areas of nature that were

used for industry. In northeast Ohio, unused railways are converted to trails and land

stripped from mining is reclaimed. Both occurred on the property in this case.

{¶43} Therefore, the phrase “green space park area” means the portion of the

property that one would use in the normal park setting, meaning the area on which one

actually walks, runs, bikes, and hikes, which is the surface, not the subsurface. The trial

court’s limitation of green space to the surface of the property was correct.

{¶44} Appellant OPWC argues that allowing lateral mining still permits Appellees

reasonable access to the surface and therefore allowing mining of any sort defeats the

purpose of a “green space park area.” Admittedly, at common law the mineral holder was

still entitled to reasonable access to the surface to reach his or her property. Eastern

Mineral Law Foundation, The Issues: The Rights and Interests at Play, 23 E. Min. Found.

§ 9.04, 2003 WL 22234516 (“Despite the availability of modern directional drilling, the

development and production of oil and gas in Eastern states most often requires

reasonable access to and the use and occupancy of some portion of the surface.”). See

also Skivolocki, 38 Ohio St.2d at 249, fn. 1 (“‘* * * unless the language of the conveyance

by which the minerals are acquired repels such construction, the mineral estate carries

with it the right to use as much of the surface as may be reasonably necessary to reach

and remove the minerals.’ See, also, 37 Ohio Jurisprudence 2d 18, Mines and Minerals,

Section 14. This implied right of the mineral owner is best explained as a practical attempt

to insure that both he, and the surface owner, can enjoy their respective estates.”). If the

mineral holder was not permitted reasonable access, then the minerals would essentially

be landlocked without means of extraction. Typically when mineral rights are leased, the

lease usually permits reasonable access to the surface by the terms of the lease. For

instance, often the lease permits drilling of water wells, building access roads, installing

fencing, and removing trees and brush. These acts affect the surface.

{¶45} The lease with Appellee Patriot includes provisions such as these.

Admittedly, it does not permit the placement of a wellhead on the property. But it does

permit removal of timber and the drilling of a water well. These things affect the surface.

However, the restrictions set forth in the deed that run with the land clearly do not permit

any disturbance of the surface. Therefore, Appellees or their heirs or assigns are not

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permitted to disturb the surface in any manner that conflicts with the use of the property

as a “green space park area.” Given the restrictions, neither the lease nor the common

law allows for access to the surface of the property at issue in this case.

{¶46} For those reasons, the language of the restriction is clear and unambiguous;

the Use and Development Restrictions only apply to the surface. The trial court’s decision

was correct on this point.

{¶47} Next, we must move to examine Appellant OPWC’s second argument

regarding the Restrictions on transfer of the Property. As to this issue, the trial court found

that applying the Restrictions on transfer of the Property to the subsurface is an

unreasonable restraint on the alienation of the property. These restrictions provide:

4. Restrictions on transfer of the Property. Grantee acknowledges that the

Grant is specific to Grantee and that OPWC’s approval of Grantee’s

application for the Grant was made in reliance on Grantee’s continued

ownership and control of the Property. Accordingly, Grantee shall not

voluntarily or involuntarily sell, assign, transfer, lease, exchange, convey or

otherwise encumber the Property without the prior written consent of

OPWC, which consent may be withheld in its sole and absolute discretion.

(Deed from Capstone Holding Company to Appellee Guernsey).

{¶48} In addressing the Restrictions on transfer of the Property, which it termed

the “Alienation Restriction,” the trial court found that the alienability of the subsurface has

no impact on the green space of the property. Therefore, the trial court concluded that

the Restrictions on transfer of the Property were an “illegal unreasonable restraint on

alienability as it has been attempted to be utilized in this case to apply to the subsurface

estate.” (July 20, 2018 Judgment Entry).

{¶49} Appellant OPWC argues these restrictions are clear and unambiguous

and required Appellee Guernsey to maintain ownership and control over the property. It

points out that these restrictions do not differentiate between a lease of the surface and

a lease of the mineral rights. It notes that the deed conveyed the entire property, including

the subsurface estate. And the deed specifically stated: “This conveyance is SUBJECT

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to the following restrictions.” One of the restrictions is the Restrictions on transfer of the

Property.

{¶50} The trial court erred in finding that the Restrictions on transfer of the

Property apply only to the surface. There is no question that Appellee Guernsey entered

into an oil and gas lease with Appellee Patriot Energy in 2011 without consent from

Appellant OPWC. Likewise, there is no question that in 2013 Appellee Guernsey sold 6/7

of its mineral interest to Appellee Siltstone without Appellant OPWC’s consent. Finally,

there is no question that in 2014 Appellee Guernsey sold 29.595 mineral acres to Triple

Crown Energy, LLC without Appellant OPWC’s consent and that interest was eventually

assigned to Appellee American Energy-Utica Minerals, LLC. These transactions were all

in clear violation of the Restrictions on transfer of the Property because not once did

Appellee Guernsey seek Appellant OPWC’s consent.

{¶51} The reference to “property” in the Restrictions on transfer of the Property

refers to both the surface and the subsurface. In the Restrictions on transfer of the

Property there is no reference to “green space park area” to modify “property.” It is

because of the green space park area language in the Use and Development Restrictions

that those restrictions only apply to the surface and not to the subsurface. As stated

above, the use of the words “premises” and “property” as used in this deed do not have

two separate meanings. The deed defines “premises” by setting out the metes and

bounds of the land sold. The word “premises” includes everything that was conveyed,

including mineral rights. Following this logic, “property” as used in the Restrictions on

transfer of the Property includes the subsurface minerals.

{¶52} It is also important to point out that the deed uses the phrase “This

conveyance is SUBJECT to the following restrictions” just before listing the restrictions.

The “conveyance” does not refer solely to the surface land but to all land conveyed,

including the subsurface mineral rights. Thus, the use of this language further supports

reading the Restrictions on transfer of the Property to apply to the subsurface.

{¶53} Moreover, while the trial court calls the restriction an “illegal unreasonable

restraint on alienability,” it offers no law or explanation for this conclusion. The issue

surrounding the Restrictions on the transfer of the Property is a matter of contract

interpretation. The language of the Restriction is clear and unambiguous. Appellee

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Guernsey was not to sell, assign, transfer, lease, exchange, or convey the property

without Appellant OPWC’s consent. Appellee Guernsey violated this restriction when it

leased and sold the property.

{¶54} In sum, there is no genuine issue of material fact that Appellee Guernsey

violated the Restrictions on transfer of the Property and that these restrictions apply to

the subsurface. Therefore, the trial court erred in granting partial summary judgment in

favor of Appellees and in denying Appellant OPWC’s motion for partial summary

judgment. Because Appellee Guernsey violated the Restrictions on transfer of the

Property, the trial court should have granted summary judgment in favor of Appellant

OPWC.

{¶55} Accordingly, Appellant OPWC’s first assignment of error has merit in part

and it is sustained in part.

{¶56} Appellant OPWC’s second assignment of error states:

THE TRIAL COURT ERRED IN DISMISSING COUNT 1 AND

COUNT 2 OF THE COMMISSION’S COUNTERCLAIM AND CROSS-

CLAIM, BECAUSE THE COMMISSION CAN ENFORCE THE DEED

RESTRICTIONS IN EQUITY.

{¶57} Appellant OPWC’s second assignment of error concerns the trial court's

November 6, 2017 judgment entry and December 18, 2017 conclusions of law, which

determined that injunctive relief was not available to Appellant OPWC. The trial court

dismissed Appellant OPWC’s claims seeking injunctive or non-monetary relief for the

alleged breach of the deed restrictions. These claims sought to prevent Appellees from

lateral mining, null the lease, and have the subsurface interest that was sold by Appellee

Guernsey returned to Appellee Guernsey.

{¶58} Appellant OPWC argues the deed restrictions allow for the right to enforce

the restrictions at law or in equity. Thus, it contends it could pursue equitable remedies.

Furthermore, it contends that although R.C. 164.26(A) only lists liquidated damages, it

does not indicate monetary damages are the sole remedy.

{¶59} The Enforcement Restriction of the deed states:

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3. Enforcement. If Grantee, or its successors or assigns as owner of the

Property, should fail to observe the covenants and restrictions set forth

herein, the Grantee or it is successors or assigns, as the case may be, shall

pay to OPWC upon demand, as liquidated damages, an amount equal to

the rate of (a) two hundred percent (200%) of the amount of the Grant

received by Grantee, together with interest accruing at the rate of six

percent (6%) per annum from the date of Grantee's receipt of the Grant, or

(b) two hundred percent (200%) of the fair market value of the Property as

of the date or demand by OPWC. Grantee acknowledges that such sum is

not intended as, and shall not be deemed, a penalty, but is intended to

compensate for damages suffered in the event a breach or violation of the

covenants and restrictions set forth herein, the determination of which is not

readily ascertainable.

OPWC shall have the right to enforce by any proceedings at law or in equity,

all restrictions, conditions, and covenants set forth herein. Failures by

OPWC to proceed with such enforcement shall in no event be deemed a

waiver of the right to enforce at a later date the original violation or

subsequent violation.

(2007 Deed from Capstone Holding Company to Appellee Guernsey).

{¶60} This restriction provides for liquidated damages. It also permits proceedings

in equity. Therefore, the restriction allows for both monetary and equitable relief.

{¶61} The trial court, however, found that R.C. 164.26(A) prohibited equitable

relief. R.C. 164.26(A) provides:

The director of the Ohio public works commission shall establish

policies related to the need for long-term ownership, or long-term

control through a lease or the purchase of an easement, of real property

that is the subject of an application for a grant under sections 164.20 to

164.27 of the Revised Code and establish requirements for

documentation to be submitted by grant applicants that is necessary for

the proper administration of this division. The policies shall provide for

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proper liquidated damages and grant repayment for entities that fail to

comply with the long-term ownership or control requirements

established under this division.

{¶62} The trial court noted that this section anticipates that grant recipients may

alienate property purchased with grant funds and imposes monetary consequences for

these actions. It found that because this section does not specifically identify equitable

relief, it cannot be a remedy. The trial court determined that granting injunctive relief in

this case would be in direct violation of R.C. 164.26(A). It reasoned that if the Legislature

had intended equitable relief to be available in cases such as this one, it would have

included equitable relief in the statute.

{¶63} Appellant OPWC argues that a breach of a restrictive covenant can

generally be prevented by a court of equity. It asserts that when deed restrictions are

clear and unambiguous, courts must enforce them. In this case, Appellant OPWC points

out, the Enforcement Restriction clearly states that it has the right to enforce all

restrictions by any proceedings at law or in equity. And it notes that Appellee Guernsey

knew that it was agreeing to the restrictions of long-term ownership of the property.

{¶64} Moreover, Appellant OPWC argues that enforcement of the restrictions by

injunctive relief is necessary to promote public policy. It contends that its equitable claims

against the appellees in this case are necessary to protect the Clean Ohio Fund and

Program. If it is not able to enforce the long-term ownership of the property via equitable

means, Appellant OPWC argues then nothing prevents a grant recipient from acting as a

straw man to acquire property and to then sell it to be used as a landfill, for strip mining,

for dumping, or any other purpose. It contends that without equitable relief as a remedy,

it would never be able to prevent any of these uses.

{¶65} Appellant OPWC’s arguments are convincing.

{¶66} First, nothing in R.C. 164.26(A) prevents equitable relief. That section

instructs the director of the OPWC to establish policies related to the need for long-term

ownership or control of property that is subject to clean Ohio conservation fund grants. It

also states the policies are to provide for proper liquidated damages and grant repayment

for entities that fail to comply with the long-term ownership or control requirements.

Reading the plain wording of the statute leads to the conclusions that (1) the OPWC

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Case No. 18 BE 0042

director must establish policies relating to the need for long-term ownership or control of

the property that is the subject of the grant and (2) some of those policies are to provide

for liquidated damages and grant repayment for failure to comply with the long-term

requirement.

{¶67} Nothing in the statute prevents equitable relief as a remedy for failure to

comply with the long-term ownership requirement. The statute does not include an

exclusive list of remedies. The remedies the statute mentions are in regard to instructing

the director of the OPWC to establish policies to provide for liquidated damages and grant

repayment.

{¶68} Second, the Enforcement Restriction clearly and unambiguously provides

that Appellant OPWC has the right to enforce the deed restrictions in equity. Nothing in

the language of the Enforcement Restriction can be construed to mean anything else.

{¶69} As noted by the Fifth District:

The Supreme Court of Ohio has consistently held that “[w]here the

language contained in a deed restriction is indefinite, doubtful and capable

of contradictory interpretation, that construction must be adopted which

least restricts the free use of the land.” Houk v. Ross (1973), 34 Ohio St.2d

77, 296 N.E.2d 266, paragraph two of the syllabus, overruled on other

grounds by Marshall v. Aaron (1984), 15 Ohio St.3d 48, 15 OBR 145, 472

N.E.2d 335. “Where the language in the restriction is clear, the court must

enforce the restriction. Otherwise, the court would be rewriting the

restriction. * * * The key issue is to determine the intent of the parties as

reflected by the language used in the restriction.” Dean v. Nugent Canal

Yacht Club, Inc. (1990), 66 Ohio App.3d 471, 475, 585 N.E.2d 554, 556-

557.

(Emphasis added); Morgan Woods Homeowners' Assn. v. Wills, 5th Dist. Licking No. 11

CA 57, 2012-Ohio-233, ¶ 42.

{¶70} The parties’ intent when they agreed to the restrictions here is clear.

Appellee Guernsey was not to “sell, assign, transfer, lease, exchange, convey or

otherwise encumber the Property without the prior written consent of OPWC[.]” If

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Case No. 18 BE 0042

Appellee Guernsey violated the above restriction, then Appellant OPWC could enforce

that restriction “by any proceedings at law or in equity[.]”

{¶71} Because the equitable relief is not prohibited by statute and because the

restrictions are clear and unambiguous, the trial court erred in dismissing Appellant

OPWC’s claims for equitable relief.

{¶72} Accordingly, Appellant OPWC’s second assignment of error has merit and

is sustained.

{¶73} For the reasons stated above, the trial court’s judgment denying Appellant

OPWC’s motion for partial summary judgment and granting partial summary judgment to

Appellees is hereby reversed. Appellant OPWC’s motion for partial summary judgment

is sustained. The trial court’s judgment dismissing Appellant OPWC’s claims for equitable

relief is also reversed. This matter is remanded to the trial court to determine the proper

equitable relief and/or the amount of liquidated damages appellant OPWC is entitled to

based on Appellee Guernsey’s breach of the Restrictions on transfer of the Property.

Waite, P. J., concurs.

Robb, J., dissents with dissenting opinion.

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Case No. 18 BE 0042

Robb, J., dissenting.

{¶74} I respectfully dissent from the decision reached by my colleagues; I would

affirm the trial court’s decision.

{¶75} I agree that the Use and Development Restrictions only apply to the

surface and the trial court was correct in that determination. However, I disagree with my

colleagues analysis regarding the Alienation Restriction. I would hold the trial court was

correct in its determination that applying the Alienation Restriction to the subsurface is an

unreasonable restraint on the alienation of the property.

{¶76} The Alienation Restriction specifically refers to Appellant OPWC. It is

undisputed that Appellee Guernsey applied for a grant from the Clean Ohio Conservation

Fund for the purposes of utilizing the space as a green space park area; its application

for the fund clearly sets forth what improvements it was making for the property and its

use. Therefore, although this restriction does not use the term “green space park area,”

the reference to Appellant OPWC indicates the purpose of the restriction is to maintain it

for the purposes that the grant was awarded to Appellee Guernsey. As discussed above,

green space refers only to surface. While it was permissible to restrain the use of the

surface and require consent for transfers of the surface, it is unreasonable to require

approval for transfers of the subsurface and permit Appellant OPWC to refuse, for any

reason, the transfer of the subsurface. This is especially the case in this instance where

the Use and Development Restriction runs with the land. This holding is the least

restrictive interpretation of the covenant and reinforces the public policy for the

development of oil and gas production. Newbury Twp. Bd. of Twp. Trustees v. Lomak

Petroleum (Ohio), Inc., 62 Ohio St.3d 387, 389, 583 N.E.2d 302 (1992) (“It is the public

policy of the state of Ohio to encourage oil and gas production when the extraction of

those resources can be accomplished without undue threat of harm to the health, safety

and welfare of the citizens of Ohio.”).

{¶77} Accordingly, I would find that the first assignment of error lacks merit in its

entirety; the Use and Development Restrictions only apply to surface and the Alienation

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Restriction does not prohibit the lease or sale of the mineral interests. Since I find there

is no breach of the restrictions, the second assignment of error, in my opinion, is moot

and I would not address it.

{¶78} For the above stated reasons, I would affirm the trial court’s decision.

[Cite as Siltstone Resources, L.L.C. v. Ohio Pub. Works Comm., 2019-Ohio-4916.]

For the reasons stated in the Opinion rendered herein, Appellant OPWC’s

first assignment of error is sustained in part and overruled in part. Appellant

OPWC’s second assignment of error is sustained. It is the final judgment and order

of this Court that the judgment of the Court of Common Pleas of Belmont County,

Ohio, denying Appellant OPWC’s motion for partial summary judgment and

granting partial summary judgment to Appellees is hereby reversed. Appellant

OPWC’s motion for partial summary judgment is sustained. The trial court’s

judgment dismissing Appellant OPWC’s claims for equitable relief is also reversed.

This matter is remanded to the trial court to determine the proper equitable relief

and/or the amount of liquidated damages appellant OPWC is entitled to based on

Appellee Guernsey’s breach of the Restrictions on transfer of the Property. Costs

to be taxed against the Appellees.

A certified copy of this opinion and judgment entry shall constitute the

mandate in this case pursuant to Rule 27 of the Rules of Appellate Procedure. It is

ordered that a certified copy be sent by the clerk to the trial court to carry this

judgment into execution.

NOTICE TO COUNSEL

This document constitutes a final judgment entry.